TSC Ratings' Upgrades, Downgrades

Cypress Semiconductor, China Unicom, Dover Corp. upgraded; Xerox, Empresas ICA downgraded.
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Each business day, TheStreet.com Ratings updates its ratings on the stocks it covers. The proprietary ratings model projects a stock's total return potential over a 12-month period, including both price appreciation and dividends. Buy, hold or sell ratings designate how the Ratings group expects these stocks to perform against a general benchmark of the equities market and interest rates.

While the ratings model is quantitative, it uses both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and company earnings forecasts. Objective elements include volatility of past operating revenue, financial strength and company cash flows.

However, the rating does not incorporate all of the factors that can alter a stock's performance. For example, it doesn't always factor in recent corporate or industry events that could affect the stock price, nor does it include recent technology developments and competitive dynamics that may affect the company.

For those reasons, we believe a rating alone cannot tell the whole story, and that it should be part of an investor's overall research.

The following ratings changes were generated on April 21.

Cypress Semiconductor

(CY) - Get Report

, a which offers high-performance, mixed-signal, programmable solutions, has been upgraded to buy. For the first quarter, revenue increased 29% year over year to $442.1 million, while earnings per share declined to a loss of 12 cents from a loss of a penny in the same period.

Return on equity greatly increased to 26% from 3.1% a year ago and now exceeds the industry average. The company's debt-to-equity ratio of 0.70 is somewhat low overall but exceeds the industry average, suggesting that the management of the debt levels should be evaluated further. This is a signal of significant strength within the corporation.

Shares have climbed 34% in the past year. The stock has a price-to-earnings ratio (P/E) of 11.90, which makes it cheaper than others in its industry. We feel the stock should continue to move higher despite its recent gains. Cypress Semiconductor had been rated hold since Jan. 28.

China Unicom

(CHU) - Get Report

, a telecommunications company operating in China, has been upgraded to buy. For the fourth quarter, the company swung to a profit of $592.7 million from a loss of $51.8 million a year ago. Revenue rose 17% year over year to $3.75 billion, and EPS swung to a 44-cent profit from a loss of 4 cents. Net operating cash flow has increased 2.6% to $1.14 billion from the year-ago quarter.

The company also exceeds the industry average cash flow growth rate of 0.9%. Its gross profit margin is rather high at 68%, but the net profit margin of 16% trails the industry average. Shares have surged 40% in the past year. We feel the stock should continue to move higher despite its recent gains. With a P/E of 22.77, the stock is cheaper than others in its sector. China Unicom had been rated hold since Sept. 17.

Dover Corp.

(DOV) - Get Report

, which makes industrial products and components, has been upgraded to buy. For the fourth quarter, earnings per share improved 15% year over year to 86 cents. The company has demonstrated a pattern of EPS growth over the past two years, and we feel that this trend should continue.

For 2008, the market expects an improvement in full-year EPS to $3.55 from $3.22 in 2007. Revenue has increased 11% year over year to $1.86 billion. The company's debt-to-equity ratio, 0.53, is below the industry average, implying that there has been successful management of debt levels. In addition, a quick ratio of 1.01 illustrates an ability to avoid short-term cash problems. Dover Corp. had been rated hold since Jan. 28.

Xerox

(XRX) - Get Report

, which provides document equipment, software, solutions and services, has been downgraded to hold. Strengths such as revenue growth and expanding profit margins are countered by a disappointing stock-price performance, deteriorating net income and disappointing return on equity.

For the first quarter, revenue rose 13% year over year to $4.34 billion, while EPS swung to a loss of 27 cents from a profit of 24 cents. For 2008, the market expects an improvement in full-year EPS to $1.30 from $1.20 in 2007. At 44%, the company's gross profit margin is strong. However, a negative net profit margin of 5.6% significantly underperforms the industry average. Net operating cash flow has decreased 72% to $52 million from the year-ago quarter and trails the industry average.

Shares are down 20% in the past year. Despite the decline, the stock has a P/E of 21.12, which puts it at a premium to others in its industry. Xerox had been rated buy since TheStreet.com Ratings initiated coverage on April 18, 2006.

Empresas ICA

(ICA)

, an engineering, procurement and construction company operating in Mexico, has been downgraded to hold. A solid stock-price performance, revenue growth and a solid financial position are weighed down by deteriorating net income, disappointing return on equity and poor profit margins.

For the fourth quarter, revenue rose 10% to $649.9 million, while earnings per share swung to a loss of $1.04 from a profit of 28 cents. The company's debt-to-equity ratio of 0.53 is higher than the industry average. However, its quick ratio of 1.69 demonstrates strong liquidity. Gross profit margin is rather low at 17%, and a negative 16% net profit margin significantly trails the industry average. Shares have climbed 56% in the past year. We do not recommend additional investment in this stock, despite its gains in the past year. Empresas ICA had been rated hold since Oct. 1.

Additional ratings changes from April 21 are listed below.

Ticker

Company Name

Change

New Rating

Former Rating

RNT

Aaron Rents

Upgrade

Buy

Hold

APOG

Apogee Enterprises

Upgrade

Buy

Hold

AVA

Avista

Upgrade

Buy

Hold

CHU

China Unicom

Upgrade

Buy

Hold

CRN

Cornell Companies

Upgrade

Buy

Hold

CY

Cypress Semiconductor

Upgrade

Buy

Hold

DOV

Dover

Upgrade

Buy

Hold

ICA

Empresas ICA

Downgrade

Hold

Buy

HDSN

Hudson Technologies

Upgrade

Hold

Sell

KEG

Key Energy Services

Upgrade

Buy

Hold

MLI

Mueller Industries

Upgrade

Buy

Hold

NUS

Nu Skin Enterprises

Upgrade

Buy

Hold

SYMS

Syms

Downgrade

Sell

Hold

XRX

Xerox

Downgrade

Hold

Buy

LBAI

Lakeland Bancorp

Upgrade

Buy

Hold

PNX

Phoenix Companies

Upgrade

Buy

Hold

SWIR

Sierra Wireless

Upgrade

Buy

Hold

CIG

CIA Energetica de Minas

Downgrade

Hold

Buy

BBNK

Bridge Capital Holdings

Downgrade

Hold

Buy

EBTC

Enterprise Bancorp

Upgrade

Buy

Hold

TLP

Transmontaigne Partners

Upgrade

Buy

Hold

SWSI

Superior Well Services

Upgrade

Buy

Hold

This article was written by a staff member of TheStreet.com Ratings.